Iran is clearly hurting from sanctions imposed by the Western world, and Shamseddin Hosseini, Iranian Minister of the Economic Affairs and Finance has recently stated that Iran plans to cut budget spending and focus on domestic production.
I am no economist by any means, but I am at a loss as to how the Islamic Republic of Iran plans to focus on domestic production without spending any money to do so. Apparently the regime has been listening to American GOP lawmakers with too keen an ear...Fox News is alive and well in Tehran!
That aside, any economist worth his weight in Excel spreadsheets will tell you that it’s damned hard to jumpstart an economy without government spending. Now I know that Iran has a big problem with the U.S., but they should absolutely pay attention to American economists like Paul Krugman who have done plenty of work to show that adequate government spending can and will increase jobs, wages, and standard of living in the long run.
However, Iran has myriad other problems to face before they start opening factories, making more rugs, and moving away from the oil sector to diversify their exports. First, they need to get past Revolutionary Guardsmen who run the oil sector and don’t want any diversity in production, stomp out rampant corruption in business and government, and adopt a new way of thinking starting at the very top with Ayatollah Khamenei. One of the biggest burdens Iran faces is its reliance on its oil sector for income, and sanctions wouldn’t be hurting nearly as much if it had diversified years ago. However, the cronyism that pervades the oil industry in Iran runs deep, and convincing oilmen to do what’s best for the country has proven difficult.
Ironically, if the Iranian regime took a page out of the Western world’s book, they may just put themselves on a path to prosperity and save their own hides in the process by becoming heroes to an angry Iranian public.